Originally posted at Fox & Hounds Daily.
By Michael Bernick.
Comstock’s magazine in Sacramento reports this week on the Sacramento-based construction businesses that are flocking to projects in the Bay Area, especially San Francisco. This report continues a long line of articles over the past few months on San Francisco’s white-hot economy and job market. The local unemployment rate is down to 5.2%, building cranes are crowding the skyline, and major tech firms, such as Salesforce, Twitter, and Autodesk, are showing hundreds of job openings on their websites on any given day.
As we begin 2014, it is timely to ask: How much of this job gold rush is due to government actions? Can it be replicated elsewhere? What is its relevance to California’s workforce community?
Like nearly all economic growth, this boom has been driven by forces outside of government. It has been distributed among sectors (business services, finance, hospitality), but driven by one sector: the internet commerce/social media industry. San Francisco has become the epicenter nationally of this industry, due to a coming together of factors, outside of government. These start with the presence of industry leaders, such as the technology firms noted above,early leaders in online gaming (Zynga), and early leaders in the share economy (AirBnB, Uber).
Further, San Francisco has benefited from being a highly desirable location for younger workers, who constitute the majority of entrepreneurs and programmers in this industry. As the industry grew, other internet commerce/social media entrepreneurs initially located in Palo Alto and even other locations nationwide, moved their companies to San Francisco. They sought to take advantage of the programming and entrepreneurial talent and synergies.
Certain actions by local government, though, did assist this industry growth. In a recent wide-ranging book about city government in the twenty-first century, If Mayors Ruled the World: Dysfunctional Nations, Rising Cities, Professor Benjamin Barber provides case studies of 11 mayors around the world whom he singles out for their activist policies. Yet, speak with the tech entrepreneurs in San Francisco and you hear praise for City Hall and Mayor Ed Lee most of all for taking care of the basics: public safety and public transportation. Crime statistics were down in 2013. The local bus and light rail service, Muni, is continually under criticism, but provides an extensive and highly reliable system compared to nearly every other urban system in the United States.
Mayor Lee has spent the time to get to know the tech industry. He has visited different companies each week to meet with the entrepreneurs. He has appeared at company openings. He has pushed the industry to participate in civic projects for the homeless, the local schools, job training programs.
Further, in 2011 he introduced the Mid-Market payroll tax breaks, that have proved more influential to tech business location and area revitalization than any government action of the past thirty years. In 2011, Twitter and several other tech firms were considering moving out of the City to meet office space expansion needs. Mayor Lee brokered a payroll tax exemption enabling firms locating in the Mid-Market area to cap payroll taxes for a number of years at the amount being paid at the time of relocation.
The result not only was that Twitter relocated to mid-Market, but also within two years, tens of other technology firms, who sought to be near Twitter and in a growing social media business community. I lived on Golden Gate Avenue and Hyde Street a few blocks away in the early 1980s, and watched over the next 30 years as various government schemes to improve the area failed, before Twitter moved in. Longtime Tenderloin Housing Clinic director and area advocate, Mr. Randy Shaw, has written in similar vein of the impact of the Mid-Market payroll tax approach.
Much of the San Francisco experience with internet commerce/social media growth is not relevant to workforce and economic development efforts elsewhere in California. Every California local Workforce Investment Board seeks to be a technology hub, as Mike Rossi notes. None is blessed like San Francisco with the existing industry structure and youth culture that will continue to draw tech entrepreneurs.
Yet, there are links to this growth for the workforce community outside San Francisco. Most directly there is the opportunity for the Bay Area WIBs outside of the City to train their workers for the technology jobs in the City. EastBay Works, the coalition of four workforce boards in the East Bay, already is looking to do so for programming positions. Municipal boundaries mean nothing for the technology workforce as for other workforces today. It is easier to get to the South of Market area from Oakland or El Cerrito by public transit than from parts of San Francisco.
Further, if other cities cannot be the internet commerce/social media hub as San Francisco, they do have opportunity for more modest, niche opportunities with this industry. Social media and internet commerce companies are less tied to physical place and natural resources than other parts of the economy, so there will be opportunities outside of San Francisco and Los Angeles. Mr. Kevin Klowden, director of the Milken Institute’s California Center, for one, has been examining niche opportunities throughout the state, as part of his broader economic development agenda.
San Francisco’s internet commerce/social media job gold rush will not be replicated elsewhere. But it does have lessons on how government should not and should participate in an industry’s growth.